Workers and management at one of the biggest naval shipyards in the US joined Tuesday to express concern over the potential damage from the latest budget standoff in Washington.

As Barack Obama used the Newport News yard in Virginia as a backdrop for his latest attempt to bounce Republicans in Congress into a deal over the sequester, employees said they were concerned that the failure to reach a deal would lead to layoffs.

The personal stories, detailing the consequences for families of unemployment or even a cut in hours, suggest the confrontation over the sequester – $86bn of budget cuts that kick in Friday if there is no deal in Congress – is already having an impact, creating fear among workers and uncertainty among businesses.

Obama, in his speech in front of thousands of shipyard workers, said the consequences of failing to agree a deal could be devastating. Republicans argue that Obama is exaggerating and is guilty of scare-mongering.

Workers in the crowd contradicted polls that suggest there is little public interest in the sequester row or that the Republicans are in line for the blame.

For these workers, the sequester is not academic. Christina Licano, a welder who came to Virgina from New Mexico two-and-a-half years ago for the work, said: "I am worried that if it does come to cuts, it will affect the navy. Our lives depend on these jobs."

Mike Petters, chief executive officer of Huntington Ingalls Industries, which owns the Newport News yard, said the budget row has already had an effect. Speaking after Obama's speech, he told the Guardian: "We are ready to make investments in our business and we are holding just now to see how this will play out."

Newport News Shipbuilding employs about 22,000, mainly building nuclear submarines and carriers. The yard provided a striking backdrop for Obama's speech, delivered to thousands of workers crowded onto the floor of a giant hangar usually reserved for submarine construction. Hundreds more lined the gangways above, many still wearing their hardhats.

The president warned that their jobs, and many others across the country, "are currently in jeopardy because of politics in Washington". The impact of the sequester would not be felt overnight, he said, but it would be real. "You know that if Congress can't get together and plan our nation's finances for the long term, that over time some of your jobs and businesses could be at risk," he said.

Obama said that at nearby Norfolk naval station: "the threat of these cuts has already forced the navy to cancel the deployment, or delay the repair of certain aircraft carriers. One that's currently being built might not get finished. Another carrier might not get started at all. And that hurts your bottom line. That hurts this community".

But workers in the audience refused to single out the Republicans for blame. Licano, the welder, was scathing of all politicians. "Why can't they get together and sort it out? We have to work together [in the yard], different trades coming together. Why can't they?"

As well as the 22,000 at the yard, there are another 70,000 in this corner of Virginia who are dependent on Defense Department contracts. The sequester puts them at risk from cuts in their hours, through to lay-off.

Beth Tilton, who instals insulation in submarines at the yard, said the economy is in the worst shape she has seen since childhood. "I am 46 years old and never seen it this bad," she said.

Tilton, a single mother originally from Miami, said: "The work puts food on the table." If there are layoffs, she said:"I would just have to survive on unemployment [benefit]."

Ricky Jordan, 54, a ship-fitter at the yard for 36 years, said there had been no layoffs in the time had been there, but he is worried now. "I am worried about layoffs. I have got a wife and four kids. One in college. I have got to see her through college," Jordan said.

Leslie Smith, 38, a submarine designer, was more sanguine. "The effect of the sequester is not official yet." But he acknowledged there is concern. "People are worried. Everyone is worried about jobs these days. On Friday, things will change, one way or another. I hope it does not effect me or the people here. No one wants layoffs."

Obama was accompanied on the trip by a Republican congressman for the area, Scott Rigell. Asked by reporters aboard Air Force One what he would say to his Republican counterparts, Rigell said: "For those who believe that the sequester ought to be fully implemented, my response is this: even if you hold the view that defence spending should come down, this is not the right way to do it. There are better alternatives to this."

Asked if he was worried about participating in what Republicans see as a campaign roadshow, Rigell said: "I boarded the plane knowing that some would potentially misinterpret this." But he said the risk was worth it in order to be allowed to put his views directly to the president.